US Wage Inflation: Crucial for Fed Policy and Corporate Profits in 2018
The behaviour of US wage inflation in the aftermath of corporate tax cuts will have important consequences for Fed policy and financial markets.
Higher effective labour supply by counting those not in the workforce and wanting a job cannot adequately explain the persistence of a flat Phillips Curve.
Evidence of the Phillips Curve operating at the local level is not entirely consistent due to individual states having different natural rates of unemployment.
Minimum wage increases by eighteen states in 2018 and tighter labour markets should raise the pressure on corporations to raise wage rates.
Growth expectations for US corporate profits in 2018 are extremely bullish, particularly for small and midcap companies, thereby raising the spectre of disappointments should rising wage pressures produce degradation in operating performance.
DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the intention of delivering independent global macro investment insights and new thematic long-term ideas to investors, along with an agnostic opinion of the markets.
Said DeSaque has over 29 years of experience working as a professional economist in financial services, primarily based in London. His working role has involved extensive travel around the world, bringing him into contact with investors of different cultural backgrounds and investment requirements. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist and Investment Strategist at US banks Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he became Head of the London Economics Department in 1996. This role allowed him to engage with senior investment professionals, alongside regulators and provided a unique perspective of market intelligence at work.
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